The trend is undeniable - new homes are gaining on existing homes as the preferred choice of homebuyers. According to the U.S. Commerce Department, new home building continues its ten-year high, just behind the all-time high of January 1989. New homes garner 20% of the market share, according to the National Association of Home Builders. The Employee Relocation Council states that most relocating families prefer new over existing homes. And the National Association of Realtors' most recent survey says that over 70% of buyers prefer to work with a Realtor.
It looks like Realtors and builders have more reason to work together than ever, but working with builders isn't the slam dunk that it should be. And that's why there is great opportunity for the smart, Internet-savvy Realtor.
First, what are the hurdles?
Many builders aren't easy to approach because they think they don't need Realtor representation. They believe that buyers will find their homes, or that they will be contacted from the sign in the yard, and they can do their own selling. Like FSBOs, they don't want to pay high commissions.
Margins are slim, particularly for smaller custom builders who are competing with production builders who can buy lumber and other supplies in greater quantities and deliver them to multiple sites and adjoining lots for even further savings. These builders are also squeezing smaller custom builders by offering customizing programs for their production properties to entice buyers. It's very cagey business move - new properties are more difficult to compare and the builder can put more of a markup on most upgrades.
Some builders are large enough or established enough to have their own on-site representatives who are familiar with their products and work with the buyer in the selection of the home's appointments. They feel these employees offer more of an advantage over a Realtor who may be marketing resale homes as well as new homes. An on-site representative is usually a licensed real estate professional who works for the builder - much like a listing agent, only the on-site representative is often paid a salary plus commission and works for one builder only. Some builders can also afford to have greeters, real estate personnel who are not licensed but who are available to register visitors such as walk-in buyers or buyers accompanied by Realtors, and they perform other tasks and functions which do not involve quoting prices, loan rates, or other discussions which may affect a forthcoming contract for sale.
Others see Realtors as resale specialists who don't understand the nuances of the new home industry and there may be some validity for this widely-held belief. Most real estate agents don't understand how to work with builders - that there is a protocol to follow to assure a better symbiotic relationship. For example, some agents send buyers out alone to look at new homes, and then when the buyer meets the builder, the agent wants to insert herself/himself into the contract. Builders expect agents to not only accompany buyers to all showings, but to register the buyer with the builder, and follow-up. They expect agents to know the community, including the infrastructure, roads, easements, and building restrictions. They expect agents who show new homes to be familiar with basic construction and to be able to explain the builder's product. If an on-site representative is available, the builder expects the agent to know when to step aside while the on-site rep does the selling.
Show what you can do
About 80 percent of builders in the National Association of Home Builders are classified as small builders. Only the largest can afford a marketing staff, and many of those still choose to use brokerage firms because of their resources. So the potential to do good business is definitely there. Most builders welcome Realtors who show their properties to clients, but how do you get the builder as a client?
You must be able to convince the builder of two things - that you can provide greater exposure for his/her properties than anyone else, and that you understand how to work with buyers and other agents in the building process. Working with an experienced agent can mean the difference between sitting on or moving inventory. Working cooperatively with real estate agents is often the best or only way to effectively reach today's new home buyers.
The advantages builders have in working with a Realtor
1. Access to relocation buyers - If you are a broker, you can offer some advantages that a builder can't provide for him/herself - access to the relocation market. Buyers working alone have to find the builder, but with the help of a relocation network, the agent brings the buyer. The agent can also put new homes in the MLS, which opens the properties to local and relocating buyers.
2. Qualified buyers - The Realtor network is proven to deliver more qualified buyers to builders. Before any good agent will open the car door for a buyer, the buyer has already been approved by a lender and is ready to make a decision to buy a standing home or choose a builder to build them a home.
3. Working with someone of trust - Builders and agents who are familiar with each other's work can move with more confidence toward a sale. A relationship built on trust is likely to close more deals faster. For trust to grow, brokers and/or agents must demonstrate awareness of inventories of near-ready and ready-to-move-in homes, which are perfect for move-up and relocating buyers who need a new home quickly.
4. Shared liability - Some builders hire Realtors to share legal liabilities as well as to share the burden of advertising expenses, a motivation you can turn to your advantage. If you could prove that your commission could be saved in the cost of advertising and promotion alone, you could take away any reason a builder would have to say "No" to you.
5. Willingness to share responsibilities - Representing a builder is very time-consuming, especially if there are multiple products. Builders expect coverage, and new-home sales are still very much an open-house activity. Your willingness to provide coverage, particularly the same person each weekend, will go a long way toward convincing a builder that you are the right one to list his/her homes with.